By Amaka Ifeakandu
Lagos
Banks credit to the private sector of the economy grew by 3.52 per cent in April this year. The credit to the sector recorded an annualized growth rate of 10.56 per cent, below the benchmark growth of 13.28 per cent.
The Central Bank of Nigeria recently observed that the continuous dismal performance of growth in credit to the private sector, noting that in spite of the Bank’s efforts, DMBs continued to direct credit largely to low employment elastic sectors of the economy, a phenomenon that had significantly contributed to the low performance of the economy.
The Net domestic credit (NDC) grew by 7.87 per cent in the same period and annualized at 23.61 per cent. At this rate, the growth rate of NDC was above the provisional benchmark of 17.94 per cent for 2016. The development in NDC according to the apex bank essentially reflected the significant growth in credit to government of 35.97 per cent in the month, annualized to 107.91 per cent.
The apex bank said that in the first quarter of 2016, the economy suffered from severe shocks related to energy shortages and price hikes, scarcity of foreign exchange and depressed consumer demand, among others. Consequently it said that the economic agents could not undertake new investments or procure needed raw materials. It explained that Shortage of foreign exchange arising from low crude oil prices manifested in low replacement levels for raw materials, other inputs as well as new investments.
In addition, the energy crisis experienced in the first five months of the year, resulted in increased power outages and higher electricity tariffs, as well as fuel shortages; which led to factory closures in some cases. The prolonged budget impasse denied the economy the timely intervention of complementary fiscal policy to stimulate economic activity in the face of dwindling foreign capital inflows.